The Bond Market Is Having A Historic Panic Attack

The last time this happened, it was 1981 and the market was on the verge of a historic collapse. Will history repeat itself?

Never before has it been more evident why the bond market is considered the “smart money” and equity market is considered the “dumb money”.

One only needs to look at recent examples, like Bed Bath & Beyond, whose bonds traded for pennies on the dollar while its equity soared and retail tried to generate a short squeeze (despite the fact that the company was heading directly toward bankruptcy) for proof.

In fact, there have been innumerable other examples similar to Bed Bath & Beyond in other meme stocks over the last couple years, but the general point is that bond markets almost always lead the equity markets in assessing risk, helped along by the fact that bonds (1) trade in large increments and (2) are difficult for most retail traders to transact and understand, assuring that unsophisticated investors can’t manipulate them.

The purpose of today’s post - the latest in my series entitled “everyone in the stock market thinks I’m a total dumbass” - is to point out another alarming divergence between the bond market and equity markets.